German economic confidence fell more sharply than ever before in March as the war in Ukraine and the sanctions against Russia dampens economic outlook, survey results from the ZEW – Leibniz Centre for European Economic Research showed on Tuesday.
The ZEW Indicator of Economic Sentiment declined 93.6 points to a current value of minus 39.3 points in March. This was the biggest drop in expectations since the survey began in December 1991. The reading was also well below the economists’ forecast of plus 10.0.
At the beginning of the COVID-19 pandemic in March 2020, the indicator had experienced a decline of 58.2 points. Expectations are now similarly low as in summer 2019.
The current conditions index dropped 13.3 points to a level of minus 21.4 points in March. The expected level was -22.5.
The collapsing economic expectations are accompanied by an extreme rise in inflation expectations, ZEW President Achim Wambach, said. The experts therefore expect a stagflation in the coming months. The worsened outlook affects practically all sectors of the German economy, but especially the energy-intensive sectors and the financial sector, said Wambach. The economic confidence index for the eurozone plunged 87.3 points to minus 38.7 points in March. The situation indicator came in at minus 21.9 points, down 22.5 points from February.
Inflation expectations for the currency bloc advanced 104.6 points to 69.5 points. At the same time, expectations for the inflation rate in Germany surged 107.7 points to a new value of 70.2 points.
About 76.5 percent of the financial experts expect the inflation rate to increase in the next six months.